Klarna, a global payments provider and shopping assistant, is reporting that 96% of BNPL purchases made during the 2023 Black Friday weekend in the United States were paid on time or early. Notably, 30% of American purchases were paid off early, ahead of their due date, up from the 24% recorded in 2022.
In 2023, Klarna saw a 30% increase in orders placed by American shoppers on Black Friday compared to the year prior, as consumers shifted away from credit cards in favor of interest-free BNPL options. Klarna now has 37 million US customers – a 32% increase year-over-year. Klarna’s fastest-growing age group in the US is individuals over the age of 50.
“This data clearly shows that consumers understand Klarna’s BNPL products, underscoring the growing demand for BNPL services and the effectiveness of our BNPL model, while also demonstrating the financial prudence of our 37 million US consumers who are looking for financial flexibility without compromising their financial health,” said Erin Jaeger, Klarna’s head of North America.
Americans currently owe $1.13 trillion on their credit cards, with balances surging by $50 billion in the last quarter of 2023, according to a new report from the Federal Reserve Bank of New York. A 2023 report from the Consumer Financial Protection Bureau (CFPB) highlights a concerning increase in credit cardholders who are either carrying over balances month-to-month or falling into arrears. Nearly one-tenth of credit card users are trapped in “persistent debt,” paying more in interest and fees annually than towards their loan principal.
“Klarna’s products are not built on encouraging people to borrow as much as possible at the highest possible rate like credit card providers. When it makes sense to use credit, our interest-free BNPL product, with short-term repayments and no revolving credit, presents a fairer, more sustainable choice. This approach results in our users maintaining an average balance of $150, far below the $6,000 often seen with credit cards,” Jaeger added.
Klarna’s Pay in 4 BNPL product is always interest-free and incurs no fees when payments are made on time when shopping at 500,000 integrated retail partners worldwide. To encourage on-time payments, Klarna charges a late fee of up to $7 for payments made after a 10-day grace period and multiple friendly reminders. The total of late fees charged on an order will never exceed 25% of the total purchase amount.
Klarna products also have additional safeguards, including new lending decisions on each transaction and restrictions on the use of its services until missed payments are fulfilled to prevent debt from accumulating. The company’s global default rate remains below 1%.